Scott v. Metropolitan Health Corporation d/b/a Metropolitan Hospital, a Michigan Corporation et al

Filing 50

ORDER denying 42 Motion to Stay. In sum, Scott has failed to make the requisite showing for a stay pending appeal. The court finds that she has failed to show a likelihood of success on the merits, that she will be irreparably harmed absent a stay , or that the public interest will be served by allowing a stay pending appeal. While the court is not convinced that Metropolitan will be "substantially injured," Nken , 556 U.S. at 434, absent a stay pending appeal, Scott bears th e burden of proof on this motion and she has failed to demonstrate three of the four factors. The Clerk of Court is DIRECTED to forward a copy of this order to the clerk's office for the United States Court of Appeals for the Fourth Circuit. Signed by Senior Judge James C. Fox on 11/21/2013. Copy of order emailed to the attention of Cathy Tyree at the Fourth Circuit. (Grady, B.)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NORTH CAROLINA
WESTERN DIVISION
No. 5:12-CV-383-F

MARY THERESA SCOTT,
Appellant,
V.

METROPOLITAN HEALTH
CORPORATION d/b/a METRO PO LIT AN
HOSPITAL,
and
MICHAEL FAAS,
Appellees.

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ORDER

This matter is before the court on Appellant Mary Theresa Scott's ("Scott") Motion for
Stay Pending Appeal [DE-42]. The motion has been fully briefed and is ripe for ruling. For the
reasons explained below, the motion is DENIED.

I. PROCEDURAL AND FACTUAL HISTORY
The procedural and factual history of this bankruptcy appeal are fully set forth in the
court's order affirming the bankruptcy court. August 23, 2013 Order [DE-39]. The court briefly
summarizes the facts relevant to the pending motion. Scott has appealed the court's August 23,
2013 Order, which affirmed the Bankruptcy Court's finding that the approximate $1.6 million
debt she owes appellees (collectively, "Metropolitan") is non-dischargeable in bankruptcy. This
court held that Scott was collaterally estopped from arguing that the debt was not incurred "for
willful and malicious injury ... to another entity." See 11 U.S.C. § 523(a)(6) (exempting from
discharge debts incurred as a result of willful and malicious injury); August 23, 2013 Order [DE-

39] at 29. According to the parties, because the court held the debt was non-dischargeable,
Metropolitan can resume collection efforts unless the court stays enforcement of its August 23,
2013 order pending appeal.
II. ANALYSIS
A. Standard of Review
Rule 8 of the Federal Rules of Appellate Procedure provides that a party must file a
motion for a stay of a judgment or order pending appeal initially in the district court. Fed. R.
App. P. 8(a). The standard of review on a motion to stay pending appeal is similar to the standard
for granting a preliminary injunction. Nken v. Holder, 556 U.S. 418,434 (2009); Long v.
Robinson, 432 F.2d 977, 979 (4th Cir. 1970). The court must consider the following factors: (1)
likelihood of success on the merits; (2) likelihood the moving party will suffer irreparable harm if
a stay is not granted; (3) whether issuance of the stay will substantially injure the other parties
interested in the proceeding; and (4) whether the stay is in the public interest. Nken v. Holder,
556 U.S. at 433-34; Hilton v. Braunskill, 481 U.S. 770, 776 (1987); Long, 432 F.2d at 979.
In the context of a motion for a stay pending appeal, "the first two factors of
the ... standard are the most critical." Nken, 556 U.S. at 434; Sojinet v. INS, 188 F.3d 703, 707
(7th Cir. 1999). The moving party must show "more than the mere possibility" of success on the
merits under the first factor, Nken, 556 U.S. at 434, and, under the second factor, more than a
possibility of irreparable injury. See Winter v. Natural Resources Defense Council, 555 U.S. 7,
22 (2008).

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B. Discussion
The court finds that Scott has failed to make a sufficient showing to warrant a stay
pending appeal. With respect to the likelihood of success on the merits, Scott maintains that the
court erred in its application of the collateral estoppel factors and the equitable exceptions to the
doctrine. Specifically, Scott challenges the court's holding that a full evidentiary hearing was not
required on the issue of Scott's intent to injure Metropolitan where she admitted the litigation
misconduct. See August 23, 2013 Order [DE-39] at 21-25. Scott maintains that the
"admissions ... are absent from the underlying record." Mem. in Supp. of Mot. for Stay Pending
Appeal [DE-43] at 3.
Scott fails to address the portions of the record cited by the Michigan District Court that,
in the court's view, establish that she admitted the litigation misconduct in this case. See United
States ex rei. Scott v. Metro. Health Corp., 375 F. Supp. 2d 626, 638 (W.D. Mich. 2005). The
Michigan District Court cites to specific portions of Scott's brief in which she admits altering the
minutes of a corporate board meeting. Because Scott altered the minutes, Metropolitan had
ample cause to terminate her employment. Scott v. Metro. Health Corp., 234 F. App'x. 341,
351-52 (6th Cir. 2007). Despite her undisputed knowledge that she altered the minutes, Scott
maintained a lengthy retaliation suit against Metropolitan. Her admissions to doctoring the
minutes establish that the suit was factually baseless, and her continued pursuit of the baseless
retaliation suit establishes her bad faith. Scott's instant motion makes no attempt to show why
this conclusion was erroneous, other than to state in conclusory fashion that the "admissions are
absent from the underlying record." Scott has failed to carry her burden of a likelihood of
success on the merits on this basis.
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Similarly, Scott's arguments regarding the failure to provide an evidentiary hearing on the
issue ofher intent and the uncertainty of the Fourth Circuit standard for evaluating§ 523(a)(6)
claims fail to show a likelihood of success on the merits. The court addressed both of these
arguments in detail in the August 23, 20 13 Order and Scott's brief makes no attempt to
demonstrate why the court's prior rulings on either of these issues were erroneous or otherwise
likely to be reversed on appeal. Instead, Scott states in conclusory fashion that the Fourth Circuit
will likely rule in her favor on these issues. That is not sufficient to show "likelihood of success
on the merits." Nken, 556 U.S. at 434 ("[M]ore than a mere possibility of relief is required [to
show likelihood of success on the merits].").
Turning to Scott's showing regarding irreparable harm, Scott advances two arguments.
First, she argues that absent a stay, she would be forced to focus on both the appeal and
addressing Appellees' efforts to execute on the judgment, which in the past have been extensive.
While the court acknowledges that this circumstance is inconvenient, the court disagrees that it
rises to level of irreparable harm. The court is confident that Scott, an accomplished and welleducated hospital administrator, and the relatively large law firm that is representing her have
enough resources between the two of them to maintain focus on the appeal and collection efforts.
Secondly, Scott argues that her appeal will be "effectively rendered moot" if she is denied
a stay pending appeal. Although the argument is not entirely fleshed out, it appears that Scott is
concerned that denying the stay pending appeal will allow Metropolitan to collect on a debt that
may be ultimately discharged in bankruptcy if her appeal is successful. This argument may have
been convincing if Scott currently possessed significant non-exempt assets. However, Scott
specifically states in her brief that she has no assets that Metropolitan can collect. Mem. in
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Supp. of Mot. for Stay Pending Appeal [DE-43] at 6-7 ("Mrs. Scott has no assets other than those
being administered by the chapter 7 trustee .... The Appellees have acknowledged on the record
that Mrs. Scott has no assets, and that their primary interest was in pursuing [her husband] for
receipt of conveyed property. That action is complete, and there is no other reason for Appellees
to pursue collection other than for purposes of harassment."). Assuming, as the court must, that
this is true, Metropolitan's collection efforts will be limited to pursuing discovery regarding
Scott's current financial condition 1 and Scott's appeal will not be rendered moot absent a stay
pending appeal. While it is true that Scott may obtain non-exempt assets while the appeal is
pending, the court is not going to allow the extraordinary remedy of a stay pending appeal absent
a concrete showing that Scott is likely to obtain such assets. Winter, 555 U.S. at 22 ("[The]
'possibility' standard is too lenient. Our frequently reiterated standard requires plaintiffs seeking
preliminary relief to demonstrate that irreparable injury is likely in the absence of an
injunction."); See Real Truth About Obama, Inc. v. Fed. Election Comm 'n, 575 F.3d 342, 346-47
(4th Cir. 2009), vacated on other grounds, 559 U.S. 1089 (2010) (same).
Turning to the harm to Metropolitan, the court agrees with Scott (and the bankruptcy
court) that the harm to Metropolitan will be relatively minimal if the stay is granted. However,
as Metropolitan notes, Scott has a history of concealing evidence and a stay pending appeal
would prevent Metropolitan using discovery procedures and other judicial enforcement methods
to investigate whether she is currently concealing assets. In addition, Scott has demonstrated that

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Because the parties do not address it, the court presumes that Metropolitan's collection efforts
will not violate the automatic stay. 11 U.S.C. § 362. However, Metropolitan should ensure that the
automatic stay has been lifted or otherwise does not apply to the sanctions debt before pursing any
collection efforts.

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she intends to pursue this litigation for the foreseeable future. The court finds Metropolitan will
be harmed if a stay is enforced at every stage ofthis litigation (as it has been thus far) and
Metropolitan is thereby prevented from investigating Scott's financial status. However, as Scott
notes, this harm does not rise to the level of "substantial injury" required by the standard. Nken,
556 U.S. at 434.
Finally, the court does not agree that the public interest will be served by a stay pending
appeal. Scott advances the identical argument in this regard that she maintained before this court
on appeal: that the substantial sanctions award will deter potential whistleblowers from coming
forward in future corporate misconduct cases. The court fails to see the connection. It is difficult
to fathom how the sanctions award in this case would deter a potential whistleblower from
informing authorities about corporate misconduct, especially in light of incentives to report such
conduct. Nothing in the Michigan sanctions opinion suggests that Scott's whistleblowing
conduct had anything to do with the sanctions award. As the court and Metropolitan have noted,
the sanctions award was caused by Scott's independent litigation misconduct and the court is
confident that potential whistleblowers who hear about this case will understand that fact.
Scott frames her second argument regarding the public interest as follows: "the very
question of the stay goes to the heart of bankruptcy policy: where the question of discharge is
pending, should a debtor's postpetition assets be subject to execution?" Mem. in Supp. of Mot.
for Stay Pending Appeal [DE-43] at 7. This may be a concern in a case where a debtor has nonexempt post-petition assets that are subject to execution and the automatic stay does not apply to

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the creditor's collection efforts, 2 but Scott has affirmatively represented that she does not
currently have any assets subject to execution. The court is not going to enforce the
extraordinary remedy of a stay pending appeal on the assumption that Scott will obtain nonexempt assets on some date in the future, absent a concrete showing that she is likely to obtain
such assets. 3
In sum, Scott has failed to make the requisite showing for a stay pending appeal. The
court finds that she has failed to show a likelihood of success on the merits, that she will be
irreparably harmed absent a stay, or that the public interest will be served by allowing a stay
pending appeal. While the court is not convinced that Metropolitan will be "substantially
injured," Nken, 556 U.S. at 434, absent a stay pending appeal, Scott bears the burden of proof on
this motion and she has failed to demonstrate three of the four factors. See Real Truth About
Obama,, 575 F.3d at 346-47 (explaining, in the related preliminary injunction context, that a

"clear showing" on each of the four elements is required).
IV. CONCLUSION
For the foregoing reasons, Scott's Motion for Stay Pending Appeal [DE-42] is DENIED.
The Clerk of Court is DIRECTED to forward a copy of this order to the clerk's office for the

2

As explained, the parties do not address the automatic stay in their briefing and the court
assumes for purposes of ruling on the motion that the automatic stay does not prevent Metropolitan from
collecting on the sanctions award. If the automatic stay applies, there is no need to request a stay of
execution of the court's prior judgment because Metropolitan would be prohibited under§ 326 from
engaging in collection efforts as to the sanctions award. 11 U.S.C. § 326(a)(7) (prohibiting "any act to
collect, assess, or recover a claim against the debtor that arose before the commencement of the [chapter
7 case]").
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The court is also confident that Scott will request a stay from the Fourth Circuit in the event
that she obtains post-petition assets that are subject to execution.

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United States Court of Appeals for the Fourth Circuit.

SO ORDERED .

.r

This the 2!_ day ofNovember, 2013.

enior United States District Judge

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